Another clean bill of health for EU accounts; auditors find improvements in many payment areas

Brussels, 10 November 2011 - For the fourth year in a row, the EU's annual accounts have received a clean bill of health from its external auditors. As for EU spending, the overall error rate is once again below 4%. This means that the vast majority (at least 96%) of total payments made in 2010 were free from quantifiable error.

Algirdas Šemeta, Commissioner for Taxation, Customs, Audit and Anti-fraud said: "The Court of Auditors report confirms that we are on the right track, although that doesn't mean that we will relax our efforts to safeguard the EU budget. We are currently preparing the next generation of EU funds. This is a chance to further improve the quality of EU spending and to get more value for money from the EU budget, especially in policies managed together with Member States. It is also a chance to show to all tax-payers that the Commission is doing everything it can to ensure that their money is properly controlled and spent."

Results for policies directly managed by the Commission keep improving, according to the Court's report, with a continuous fall in the error rate in areas such as research, external aid, development and enlargement. In agriculture, the situation remains stable with the level of error close to the threshold set by the Court. Direct farm payments, which accounted for €39.7 billion, were free from material error.

For cohesion policy, where Member States directly manage projects to boost competitiveness and growth in regions across Europe, the error rate went up slightly as compared to 2009. This increase on last year is partly due to fact that many programmes started in previous years had to be paid for from 2010. This meant that payments subject to complex eligibility rules increased substantially in volume compared to the previous year, leaving more scope for error.

The error rate for cohesion policy nonetheless still stands well below the levels reported from 2006 to 2008, thanks notably to the general improvement of the preventive and corrective measures and the stricter provisions in the management and control framework in the current programming period. The Commission focuses such measures on the Member States and regions where these errors are the most frequent.

Last year, the Commission repeatedly used the corrective measures at its disposal, such as the interruption and suspension of payments to Member States, when it had doubts about how the money was being used. For instance, in 2010 the Commission temporarily blocked payments worth of €2.15 billion in the European Regional Development Fund alone. The possibility to interrupt payments has been used regularly since last year and applied already in more than a hundred cases. In addition, across the whole budget, € 1.55 billion was recovered or corrected in 2010 – a 10 % increase on 2009.

Regarding the effectiveness of the systems to detect and correct errors, the Court of Auditors considers that although, for certain chapters, the systems were considered only partially effective, 90% of all errors identified in their samples are found outside the Commission, at the level of beneficiaries.

Background

Errors do not mean that EU money is lost, wasted or affected by fraud. When the Court of Auditors refers to an error rate, it means that money should not have been paid out because the project did not fulfil all conditions to be "eligible" to EU financial support or because some mistake occurred in a procedure related to the project. For example, public procurement rules may not have been properly followed, or there may have been mistakes in the calculation of expenses. Where errors do occur, mechanisms are in place to detect and correct them and the Commission takes all necessary measures to protect the EU budget / tax-payers’ money.

Under the Treaty (Article 317 TFEU), the Commission implements the budget on its own responsibility. However, under shared management (including e.g. agriculture, rural development, regional and social policies and fishery programmes representing about 80% of the Union's budget), the first level controls and checks belong to the national authorities. They design and implement their own systems which are subject to Commission's and the Court of Auditors' audit.

The Commission has taken many steps in its proposals for the next generation of programmes (2014-2020) to further improve the management of EU funds. These include stricter corrective measures if Member States fail to address irregularities on time; a new system for monitoring progress in achieving set targets; and a new control framework which will require national management authorities to sign a statement of assurance on their accounts. Moreover, in case serious weaknesses are found by the Commission or the Court of Auditors, it is proposed that the Commission will be able to cancel some or all of the EU contribution to a programme and demand recovery from a Member State. This would mean that Member States would lose EU funds if they fail to identify and correct irregularities before submitting the reimbursement claims to the Commission.

Next steps

Following the publication of the Court of Auditors’ annual report, the Council will provide the European Parliament with a recommendation on whether or not to grant budget discharge to the Commission. Based on this recommendation, the European Parliament will vote on its discharge resolution regarding the 2010 budget in May 2012.